By Jessica I. Marschall, CPA, ISA AM
September 19th, 2026
My work as CEO of The Green Mission Inc. and GM-ESG along with Probity Appraisal Group over the past seven years, threw us into the valuation market for used building materials, furniture, fixtures, appliances, antiques, and household contents. Our work is primarily to opine on the IRS defined Fair Market Value of the property being donated to charity. But as the work has progressed, we are pulled into tax and business consulting engagements on the feasibility of both brick-and-mortar and online secondary retail marketplaces. Our passion is to drive sustainability and reuse across sectors and the information below includes some of the current market data for secondary retailers, market constraints, and new opportunities as our landfills are FULL and as we face an economy that desperately needs long-term, well-paid jobs for humans that offer wages high enough to do the important things like buy houses, and pay for utilities.
We had deconstruction work in Wisconsin this week as well as tax work for some of our corporate tax clients in my other company (MAS LLC) and we spent some time digging into the local secondary market logistics in the Milwaukee and Madison area as well as our observations nationwide.
For purposes of this discussion, the secondary retail market refers to businesses selling previously owned, salvaged, reclaimed, donated, consigned, or surplus tangible personal property to subsequent users. These businesses, which include thrift and resale shops, architectural salvage yards, building material reuse centers, and surplus dealers, have historically been analyzed as low-margin, high-effort operations that depend on inexpensive inventory and comparatively inexpensive real estate. That characterization is increasingly incomplete. The expansion of online sales, shipping capability, integrated fulfillment, and cooperative inventory networks creates opportunities for secondary retailers to reach larger markets, improve price realization, increase inventory turnover, and spread fixed operating costs across a broader revenue base. These developments are particularly important to personal property appraisers because the secondary retail channel is frequently the market in which used goods and reclaimed building materials are sold to the public, and the depth, geographic reach, and economic viability of that market directly affect marketability and observable transaction data.
The Cost of Opening the Doors
The capital required to enter the secondary market varies considerably by product category. Published small-business startup estimates place the capital required for a general thrift operation between $20,000 and $150,000, and the principal reason for the comparatively low figure is that donated or consigned inventory removes the largest upfront expense that a traditional retailer carries. The same estimates budget fixtures and displays at $2,000 to $5,000, a figure that can be reduced further by acquiring used fixtures from closing stores, which is itself a small illustration of the secondary market serving its own participants.
Building material dealers occupy a heavier cost tier because the goods are bulky, the handling equipment is expensive, and the space requirements are substantial. One published industry startup estimate places opening costs for building material dealers between $75,000 and $400,000, with a typical budget of approximately $238,000. Within that estimate, equipment and build-out typically consume about $79,000, opening inventory approximately $73,000, and a three-month working capital reserve roughly $59,000. Geography compounds the burden, since the same source indicates that build-out and rent run 40 to 60 percent higher in California, New York, and Massachusetts than in Texas, Florida, or Ohio. A reuse retailer handling reclaimed cabinetry, doors, lumber, and fixtures faces the same forklift, racking, truck, and warehouse requirements as a conventional dealer, and therefore inherits much of this furniture, fixtures and equipment (FF&E) and real estate burden even when the inventory itself arrives at little or no acquisition cost.
The Baseline Margin Structure
The published benchmarks describe a business with attractive gross margins and thin operating margins. Thrift retailers generally report gross margins of 30 to 50 percent, with apparel frequently reaching 45 to 70 percent, while net margins for well-managed stores fall between 5 and 15 percent. A substantial portion of the difference between gross and net margin reflects labor and occupancy costs, together with transportation, processing, utilities, insurance, and other operating expenses. Labor typically runs 18 to 25 percent of revenue because donated and reclaimed goods must be received, sorted, evaluated, cleaned, priced, and merchandised individually, and the conventional guidance is to hold rent below 15 percent of projected revenue. Small rural stores with annual revenue of $100,000 to $200,000 report net margins of only 3 to 5 percent, which demonstrates how quickly a fixed storefront cost overwhelms a limited local customer base.
Conventional building material dealers show a similar pattern. Cost of goods sold in the sector averages about 61 percent of revenue, and the industry average profit margin is approximately 4.0 percent. Home Depot, the dominant national home improvement retailer, reported a 33.3 percent gross margin, a 12.7 percent GAAP operating margin, a 13.1 percent adjusted operating margin, and an 8.6 percent net margin for fiscal 2025. Secondary retailers that acquire donated, consigned, or low-cost reclaimed inventory may therefore possess a significant gross margin advantage over conventional new-product retailers. The analytical question is how much of that potential advantage survives the labor, transportation, processing, storage, occupancy, and other operating expenses required to bring heterogeneous used goods to market.
What the Transaction Data Shows
Transaction data from sold businesses offers useful evidence of margin movement among conventional building material and hardware stores, which serve here as a proxy rather than a direct measurement of reuse retailers. Among such stores sold over the 2021 through 2025 period, median revenue declined 9 percent while owner’s discretionary earnings increased 4 percent, and discretionary earnings as a percentage of revenue moved from 16.2 percent in 2021 to 18.7 percent in 2025, averaging 17.2 percent across the period. It should be noted that seller’s discretionary earnings includes the economic benefit attributable to owner compensation and certain owner-related or discretionary expenses and therefore is not directly comparable to net income or conventional operating margin; the relevant observation is the direction of the trend, in which earnings grew on a smaller revenue base. Valuation multiples also strengthened over the period, as the average revenue multiple reached 0.64 in 2025, the highest level of the five-year period, although the same data source cautions that multiples fluctuate with interest rates, inflation, consumer spending, and overall economic growth, as well as with the mix of businesses sold in a given year. Size remains a consistent factor, since a supply business generating $3 million in sales may command an earnings multiple of 3.7 or better while a store below $1 million may sell closer to two times earnings.
Online Sales and the Storefront as a Fulfillment Asset
The most significant change in the economics of the secondary storefront is that the building no longer serves only the customers who can drive to it. According to the U.S. Census Bureau, e-commerce accounted for 17.1 percent of total United States retail sales in the second quarter of 2026 on a seasonally adjusted basis, compared with 10.7 percent as reported for the second quarter of 2019. The expansion of e-commerce has increased the ability of retailers to expose inventory to buyers beyond their immediate geographic markets, while physical locations increasingly serve multiple functions that include merchandising, inventory storage, order fulfillment, pickup, and delivery.
The national building material retail market provides a useful illustration of this operating model. Home Depot reports that its e-commerce platform generates approximately $25 billion in annual sales, while more than half of its online orders are fulfilled through its stores. The company also reports that delivered sales now represent approximately 30 percent of overall sales. The physical store therefore functions not merely as a point of sale, but as part of an integrated inventory, fulfillment, pickup, and delivery network.
The scale is different for a secondary retailer, but the economic principle is transferable. A reclaimed mantel, a set of period doors, architectural millwork, or a lot of commercial casework exposed only to local traffic must wait for a geographically proximate buyer with a specific need. Digital exposure expands the potential buyer population and may improve the probability of matching a unique asset with a buyer willing to pay for its particular characteristics. Online exposure may improve price realization and reduce the need for markdowns by increasing the number of potential buyers for unique or limited-quantity goods. When the existing storefront or warehouse also serves as the inventory and fulfillment location, additional sales can be generated without a proportional increase in occupancy expense. Many resale operators already sell through platforms such as eBay alongside a physical location, and shipping charges recovered from the buyer can convert what would otherwise be an absorbed transportation cost into a pass-through.
Coordinated Inventory and the Larger Order
One of the most significant commercial limitations of a secondary retailer is lot size. A contractor or developer who needs forty matching interior doors or several thousand square feet of consistent flooring cannot be served by one store holding six doors and one pallet, and that buyer has historically defaulted to new product. Cooperative arrangements among secondary retailers, in which participants share a common catalog and combine holdings to fill a single larger order, address this limitation directly.
The primary market has already demonstrated the value of assembling and delivering larger orders. Professional contractors account for about half of Home Depot’s revenue according to one industry analysis, and in 2024 the company completed the acquisition of SRS Distribution for a total enterprise value of approximately $18.25 billion. SRS brought a branch network of more than 760 locations across 47 states, together with a fleet of more than 4,000 trucks and jobsite delivery capability, and Home Depot stated that the acquisition would enable it to better serve complex project purchases by renovators and remodelers. The acquisition demonstrates the value Home Depot placed on supplementing its existing store and distribution network with specialized branch inventory, professional sales capabilities, trade credit, and jobsite delivery infrastructure designed for complex project purchases.
The technology that permits pooling is increasingly accessible to small operators, since integrating enterprise resource planning systems with e-commerce platforms provides real-time inventory tracking and reduces manual labor, and digital platforms support cross-selling and upselling that can raise average order value while reducing inventory carrying costs. For the secondary retailer, a pooled order offers three potential benefits: a larger ticket carries lower handling labor per dollar of revenue, consolidated freight lowers transportation cost per unit, and slow-moving inventory that would otherwise be discounted or discarded may be sold at full price as part of a complete lot.
For appraisal purposes, cooperative inventory networks may have an additional consequence beyond retailer profitability. They can increase the effective depth of the secondary market itself. An individual reuse center may not possess sufficient quantity to satisfy a commercial buyer, but a coordinated network of retailers can aggregate physically dispersed inventory into a marketable lot. This can increase the number of economically viable transactions for reclaimed materials that previously lacked sufficient quantity or geographic reach to compete with new product. Greater market depth does not necessarily increase the value of every individual item, but it can improve marketability, reduce exposure time, and produce a larger body of observable secondary-market transactions from which appraisers can develop market-supported conclusions.
Inventory Turnover and the Cost of Carrying Unique Goods
The economics of inventory differ fundamentally between the primary and secondary markets. A retailer of new goods generally replenishes standardized stock keeping units, so that each sale is followed by an identical replacement and the shelf position is never truly vacated. A salvage or reuse retailer, by contrast, often owns or controls unique inventory that can occupy warehouse space for months or years while awaiting the particular buyer whose project requires it. Warehouse and rack capacity can therefore become a particularly scarce resource for the reuse retailer, and every item that lingers imposes an opportunity cost on the space it occupies, in addition to the repeated handling, relocation, and merchandising effort that slow-moving goods require.
Consequently, the economic benefit of a broader market is not limited to the potential for higher selling prices. A reuse center that sells a $2,000 reclaimed item six months earlier than it otherwise would have creates an economic benefit even if the selling price is unchanged, because the retailer frees floor or rack space, reduces handling, avoids repeated merchandising effort, and can replace the item with additional revenue-producing inventory. Faster turnover also permits the retailer to accept a greater volume of incoming material, which is of particular consequence for deconstruction projects that release large quantities of reclaimed materials within a compressed period. From an appraisal perspective, turnover bears directly on exposure time and on the volume of completed transactions available for analysis.
An Illustration of Operating Leverage
The following hypothetical example, which uses assumptions consistent with the benchmark ranges cited above and is not drawn from any specific retailer, demonstrates the effect of adding online and pooled-order revenue to a fixed storefront. The illustration demonstrates operating leverage; it is not intended to estimate the expected profitability of a particular secondary retailer. For purposes of the illustration, existing store labor is assumed to have sufficient capacity to support the incremental sales, while additional fulfillment-related labor, platform fees, and unrecovered freight are included in the 20 percent incremental fulfillment expense.
A 30 percent increase in revenue produces a 250 percent increase in operating profit because the occupancy and core labor costs were already committed. The illustration holds gross margin constant, so that the entire improvement is attributable to the absorption of fixed costs rather than to any assumed increase in selling prices.
Managing the Costs That Continue to Rise
None of these strategies eliminates cost pressure. Even the largest operator in the sector is not projecting margin expansion, as Home Depot’s fiscal 2026 guidance, reaffirmed in August 2026, anticipates a gross margin of approximately 33.1 percent and an operating margin of approximately 12.4 to 12.6 percent, each slightly below its fiscal 2025 results, and the company specifically cited unplanned fuel, energy, and other product input costs in that reaffirmation. Home Depot has supported its interconnected retail and fulfillment strategy through substantial continuing investment, including the addition of nearly 200 supply chain facilities over the past eight years. The secondary retailer cannot match that capital, but it can apply the same logic at a smaller scale. Transportation costs can be mitigated through recovered shipping charges, consolidated loads, route optimization, and coordinated fulfillment. Labor costs can be managed through disciplined scheduling, which is among the most direct levers on profitability in this sector, and through automation of order processing and invoicing. FF&E and real estate costs can be managed by using the same square footage and the same equipment as both sales floor and fulfillment center, and by relying on partner inventory to broaden the catalog without leasing additional space.
Market Exposure and Price Discovery
The expansion of the secondary market also has implications for price discovery. Greater geographic exposure does not necessarily mean that an individual asset has a higher fair market value. Rather, exposing unique property to a larger population of informed and interested buyers can improve price discovery by increasing the opportunity for transactions between market participants. For an appraiser developing a fair market value conclusion, those transactions may provide useful market evidence when the circumstances of sale are consistent with the applicable definition of value and appropriate adjustments are made for location, shipping, condition, quantity, transaction costs, and terms of sale.
Valuation Perspective
The available data does not establish that secondary retailers as a class are already experiencing wider margins, and we do not and cannot yet make that claim. What the evidence supports is that omnichannel distribution and pooled inventory can create meaningful operating leverage for a retailer that is obligated to carry a physical location, and that the same mechanisms can deepen the relevant secondary market for used goods and reclaimed building materials. A retailer that can reach buyers beyond its immediate geography, fill larger orders through cooperative inventory, turn unique goods more quickly, and earn a sustainable operating margin is positioned to be a more durable market participant, and a more durable channel supports more reliable comparable sales data. For the appraiser, the practical consequence is that the market in which reclaimed property is sold has the capacity to become less geographically constrained and more observable as digital sales, coordinated inventory systems, and integrated fulfillment expand. Transactions generated by operators that treat the storefront as one component of an integrated sales and fulfillment system may therefore become increasingly relevant sources of secondary-market data.
Our work at The Green Mission and GM-ESG is to keep studying this market, reporting what we find, and working across every part of the transaction, from the nonprofit donee to the storefront retailer to the online marketplace. The goal is simple: better data, better connections, and a secondary market that actually works at scale.
And this is where I think it gets exciting. We want reuse to become the first choice, not the alternative. I want the 13-year-old shopping for back-to-school clothes at St. Vinny’s or the local thrift store and finding the rest online. I want the family renovating a kitchen to look at reclaimed inventory before ordering new. Because if the choice is a $20,000 Sub-Zero or a great five-year-old one for $5,000, why are we automatically buying the new one? I will also continue to maintain that a good appliance may very well outlive the human lifespan.
That is how sustainability becomes economic reality: make reuse easier to find, easier to buy, and financially smarter. You can learn more about our work in sustainability, tax policy, valuation, and deconstruction appraisals through The Green Mission, GM-ESG, Probity Appraisal Group, and MAS LLC.
You can visit our company websites for more information about sustainability, tax policy, valuations, deconstruction appraisals and much more!
Sources
- How to Start a Thrift Shop (Homebase)
- Other Building Material Dealers Startup Cost Breakdown (RevenueRanked)
- Building Material and Hardware Store Valuation Benchmarks (BizBuySell)
- Quarterly Retail E-Commerce Sales, 2nd Quarter 2026 (U.S. Census Bureau)
- Quarterly Retail E-Commerce Sales, 2nd Quarter 2019 (U.S. Census Bureau)
- The Home Depot Fourth Quarter and Fiscal 2025 Results
- The Home Depot Second Quarter Fiscal 2026 Results; Reaffirms Fiscal 2026 Guidance
- The Home Depot Announces Agreement to Acquire SRS Distribution (March 28, 2024)
- The Home Depot Completes Acquisition of SRS Distribution (June 18, 2024)
- The Home Depot 2025 Investor Conference Transcript
- Home Depot touts $25 billion ecommerce business (Digital Commerce 360)
- Home Depot expands AI, B2B as it grows online sales in Q4 2025 (Digital Commerce 360)
- Home Depot's Retail Rule (MMCG Invest)
- B2B eCommerce Is Booming in the Building Material Industry (Rapidops)